Close

Forgot your password?

Choose a newsletter




Premium access provided by ENSTA

Your premium access provided by ENSTA

Enter your email to begin

Premium access granted to you by NRC Q

You been given free premium access to Worldcrunch for 8 weeks thanks to NRC Q.

Enter your email to begin

Premium access granted to you by EM-LYON

You been given free premium access to Worldcrunch for 8 weeks thanks to EM-LYON.

Enter your email to begin

Premium access granted to you by Goldsmiths

You been given free premium access to Worldcrunch for 8 weeks thanks to Goldsmiths.

Enter your email to begin

Premium access granted to you by MinnPost

You been given free premium access to Worldcrunch for 6 months thanks to MinnPost.

Enter your email to begin

Premium access granted to you by Expatica

You've been given FREE premium access to Worldcrunch

Enter your email to begin

Worldcrunch

Analyst: Amazon Shares To Rise 13% This Year, But Not Thanks To E-Books

Jeff Bezos' company has its head in the cloud.

Article illustrative image Partner logo All smiles for Amazon founder Jeff Bezos

Amazon is notoriously tight-lipped about how much money it really makes on its cloud business, Amazon Web Services. 

But it could be sitting on a unit that will generate nearly $4 billion of high-margin revenues this year, writes Macquarie Capital analyst Ben Schachter in a research note issued last week.

He believes that AWS will bring in $3.8 billion in revenue in 2013 and would be valued at a $19 billion company if were a stand-alone company.

And he, says, that's conservative, based on "our 2013 AWS revenue estimate." If he was aggressive enough to use an 8x multiple, AWS would be worth up to $30 billion, he writes.

Plus, AWS's gross margins are really high, he says because "Amazon runs all AWS costs, including employee/ operational and depreciation, through the Technology & Content expense line."

This meant that AWS contributed 190 points of overall gross margin to Amazon in 2011 and it will contribute more than 500 points by 2015, he says.

It all adds up to Amazon why he thinks Amazon's share price will hit $305 in the next 12 months. Amazon closed above $268 on Thursday.

But others wouldn't buy all of his analysis.

Amazon doesn't break out AWS revenue and margins in its financial reports. It lumps in AWS in  its “other” revenue category. And another school of thought believes that Amazon sells its cloud services on razor thin margins, points out GigaOM's Barb Darrow.

We're pretty sure that Amazon is making at least a decent return for its effort with AWS, even if it's not the 500+ points of gross margin that Schachter envisions.

However, we're skeptical that enterprises will rush to Amazon more than other clouds available to them, from Google to Rackspace.

That's because, while Amazon is known for its cutting-edge cloud tech and low costs, it doesn't have a great reputation for reliability, a crucial consideration for an enterprise. All clouds go down at some point, but Amazon's outages are highly visible, such as the one that brought down Netflix on Christmas.

Sign up for our weekly Global Biz & Innovation newsletter now


Worldcrunch brings top stories from the world's best news sources into English for the first time.

- Find out how we work
- Stay connected with our newsletter
- Try premium access for just $0.99

Want to get in touch or report a bug? Find us at info@worldcrunch.com

Load More Stories

Unlimited access to exclusive journalism, the best world news source across all your devices

Subscribe Now Photo of Worldcrunch on different devices

Your premium access to Worldcrunch is provided by

University of Central Lancashire

Please register to begin


By registering you agree to our terms of service and privacy policy.